Expanding in more ways than one

by NISHA RAMCHANDANI, 09/06/2014

THE next one year is going to be a busy one for Scoot. The low-cost carrier is set to take delivery of its first Dreamliner, even as it seeks to build a stronger alliance with budget carrier Tigerair at home and spreads its wings overseas with its first joint venture NokScoot.

Fully owned by Singapore Airlines (SIA), Scoot took to the skies in June 2012 in a move widely seen as SIA's efforts to claw back ground lost over the years to budget carriers such as Jetstar Asia and AirAsia.

Since its inception, Scoot's load factors have stayed above the 80 per cent threshold with the airline carrying its two millionth passenger in January this year.

Yields, however, are tougher to maintain, as is the case for many airlines these days. "It's certainly challenging, partly because we're still in the launch phase for a number of our routes. Many of them, we've only been flying for 12 months," said Scoot chief executive Campbell Wilson, who was with the SIA group before taking the helm at the budget carrier

In Australia, competition is stiff, while the depreciation of the Australian dollar hasn't helped matters. Meanwhile, demand for flights to Bangkok have fallen as Thailand's capital continues to experience political turmoil.

Falling traffic

Changi Airport has also felt the heat of regional political tensions, with passengers handled up just 1.7 per cent year on year to 17.58 million for the four months spanning January to April. For the month of April, Thailand and China traffic fell 15 per cent and 8 per cent respectively, said airport operator Changi Airport Group (CAG).

Travel has declined out of certain Chinese markets in the wake of the disappearance of flight MH370. Singapore, a destination often done together with Malaysia and Thailand, is taking a hit as a result.

"But the other markets are performing quite well," Mr Wilson added.

SIA has yet to release figures on Scoot's financial performance.

Scoot currently operates a fleet of six wide-body Boeing 777-200s to 12 destinations besides Singapore - namely markets such as China, Australia, Taiwan, Thailand, Japan and South Korea.

But come November, it will transition to the Dreamliner by receiving the first of 20 Boeing 787 aircraft that were initially ordered by SIA.

Last month, SIA announced that it was buying 400 million shares in Scoot for $400 million, which will help fund the acquisition of Scoot's Dreamliners, due to come in a mix of 8 and 9 variants.

By end-March 2015, Scoot would have received two Dreamliners, and a total of six new planes by August next year. These will be used to phase out its existing 402-seater 777 aircraft, enabling it to eke out greater efficiencies with the next-generation plane.

By end-March 2016, Scoot will have 11 787s - which will facilitate frequency increases and network expansion - and a fleet of 20 by 2019.

Fuel burn per seat is expected come down 20-25 per cent with the Dreamliner, which is substantial given that some 50 per cent of Scoot's costs come from fuel.

Further growth of its network is expected by the middle of next year, although the carrier is likely to stick to its sweet spot of a five to nine hour flight radius.

Another key development - although this is contingent on approvals from the Competition Commission of Singapore (CCS) - is the further deepening of Scoot and SIA-backed Tigerair's partnership.

Earlier this year, the two carriers applied to the CSS for the green light to work together on areas such as scheduling, pricing as well as sales and marketing, and are awaiting a decision.

For passengers, this would mean the ability to tap services by both carriers, such as flying up to a destination on one carrier and back on the other. Better scheduling between the two carriers would be a boost for transit passengers as they could select more compatible flights, which in turn could attract more transit passengers to Changi Airport.

Scoot, for instance, could deploy its bigger aircraft on slots with heavier volumes, given that Tigerair operates smaller, single-aisle planes.

Plus, with strong transit feed, the airlines would be less reliant on traffic originating from Singapore which may spur more services, enabling costs to come down. This can then be passed on to consumers in the form of lower fares.

In a recent report, CAPA - Centre for Aviation highlighted that budget carrier AirAsia X has been driving transit traffic through Kuala Lumpur International Airport onto other AirAsia Group flights - a model that Changi, Tigerair and Scoot would do well to replicate. CAPA noted that while Scoot and Tigerair are already offering joint itineraries, this has yet to yield significant transfer traffic.

Joint venture

Meanwhile, Scoot is also working on setting up a joint venture with Thailand's Nok Air which will operate medium/long haul services using the 777. NokScoot, as it is known, will operate out of Bangkok's Don Muang airport, where Nok operates and where capacity is less constrained vis-a-vis Suvarnabhumi International.

The new carrier is slated to launch in the second half of this year, although the launch date may hinge on regulatory approvals and the political climate.

North Asia is the first market that NokScoot will serve, with the aim of getting travellers down to Bangkok, which Scoot already operates to. This would enable Scoot to bring travellers from Bangkok to Singapore as well as down to Australia, and vice versa.

"It allows us to serve cities that we couldn't otherwise serve from Singapore simply because there isn't the volume of traffic, so in that respect Bangkok does give us an opening to other markets that are not viable for Scoot," Mr Wilson added.

With two years under its belt, Scoot will now work on ensuring the carrier continues to keep operational standards stable as well as filling seats and improving yields.

Other "nice add-ons" which were not immediate priorities when the fledging carrier was launched are also in the works, such as a mobile app and Web check-in.

And with its fleet set to roughly double by March 2016, work is already underway to begin charting its expanding network.

"The planning for that already has started," Mr Wilson said.

THE next one year is going to be a busy one for Scoot. The low-cost carrier is set to take delivery of its first Dreamliner, even as it seeks to build a stronger alliance with budget carrier Tigerair at home and spreads its wings overseas with its first joint venture NokScoot.

Fully owned by Singapore Airlines (SIA), Scoot took to the skies in June 2012 in a move widely seen as SIA's efforts to claw back ground lost over the years to budget carriers such as Jetstar Asia and AirAsia.

Since its inception, Scoot's load factors have stayed above the 80 per cent threshold with the airline carrying its two millionth passenger in January this year.

Yields, however, are tougher to maintain, as is the case for many airlines these days. "It's certainly challenging, partly because we're still in the launch phase for a number of our routes. Many of them, we've only been flying for 12 months," said Scoot chief executive Campbell Wilson, who was with the SIA group before taking the helm at the budget carrier

In Australia, competition is stiff, while the depreciation of the Australian dollar hasn't helped matters. Meanwhile, demand for flights to Bangkok have fallen as Thailand's capital continues to experience political turmoil.

Falling traffic

Changi Airport has also felt the heat of regional political tensions, with passengers handled up just 1.7 per cent year on year to 17.58 million for the four months spanning January to April. For the month of April, Thailand and China traffic fell 15 per cent and 8 per cent respectively, said airport operator Changi Airport Group (CAG).

Travel has declined out of certain Chinese markets in the wake of the disappearance of flight MH370. Singapore, a destination often done together with Malaysia and Thailand, is taking a hit as a result.

"But the other markets are performing quite well," Mr Wilson added.

SIA has yet to release figures on Scoot's financial performance.

Scoot currently operates a fleet of six wide-body Boeing 777-200s to 12 destinations besides Singapore - namely markets such as China, Australia, Taiwan, Thailand, Japan and South Korea.

But come November, it will transition to the Dreamliner by receiving the first of 20 Boeing 787 aircraft that were initially ordered by SIA.

Last month, SIA announced that it was buying 400 million shares in Scoot for $400 million, which will help fund the acquisition of Scoot's Dreamliners, due to come in a mix of 8 and 9 variants.

By end-March 2015, Scoot would have received two Dreamliners, and a total of six new planes by August next year. These will be used to phase out its existing 402-seater 777 aircraft, enabling it to eke out greater efficiencies with the next-generation plane.

By end-March 2016, Scoot will have 11 787s - which will facilitate frequency increases and network expansion - and a fleet of 20 by 2019.

Fuel burn per seat is expected come down 20-25 per cent with the Dreamliner, which is substantial given that some 50 per cent of Scoot's costs come from fuel.

Further growth of its network is expected by the middle of next year, although the carrier is likely to stick to its sweet spot of a five to nine hour flight radius.

Another key development - although this is contingent on approvals from the Competition Commission of Singapore (CCS) - is the further deepening of Scoot and SIA-backed Tigerair's partnership.

Earlier this year, the two carriers applied to the CSS for the green light to work together on areas such as scheduling, pricing as well as sales and marketing, and are awaiting a decision.

For passengers, this would mean the ability to tap services by both carriers, such as flying up to a destination on one carrier and back on the other. Better scheduling between the two carriers would be a boost for transit passengers as they could select more compatible flights, which in turn could attract more transit passengers to Changi Airport.

Scoot, for instance, could deploy its bigger aircraft on slots with heavier volumes, given that Tigerair operates smaller, single-aisle planes.

Plus, with strong transit feed, the airlines would be less reliant on traffic originating from Singapore which may spur more services, enabling costs to come down. This can then be passed on to consumers in the form of lower fares.

In a recent report, CAPA - Centre for Aviation highlighted that budget carrier AirAsia X has been driving transit traffic through Kuala Lumpur International Airport onto other AirAsia Group flights - a model that Changi, Tigerair and Scoot would do well to replicate. CAPA noted that while Scoot and Tigerair are already offering joint itineraries, this has yet to yield significant transfer traffic.

Joint venture

Meanwhile, Scoot is also working on setting up a joint venture with Thailand's Nok Air which will operate medium/long haul services using the 777. NokScoot, as it is known, will operate out of Bangkok's Don Muang airport, where Nok operates and where capacity is less constrained vis-a-vis Suvarnabhumi International.

The new carrier is slated to launch in the second half of this year, although the launch date may hinge on regulatory approvals and the political climate.

North Asia is the first market that NokScoot will serve, with the aim of getting travellers down to Bangkok, which Scoot already operates to. This would enable Scoot to bring travellers from Bangkok to Singapore as well as down to Australia, and vice versa.

"It allows us to serve cities that we couldn't otherwise serve from Singapore simply because there isn't the volume of traffic, so in that respect Bangkok does give us an opening to other markets that are not viable for Scoot," Mr Wilson added.

With two years under its belt, Scoot will now work on ensuring the carrier continues to keep operational standards stable as well as filling seats and improving yields.

Other "nice add-ons" which were not immediate priorities when the fledging carrier was launched are also in the works, such as a mobile app and Web check-in.

And with its fleet set to roughly double by March 2016, work is already underway to begin charting its expanding network.